James Currier, NFX. Image credit: Christopher Michel, https://www.flickr.com/photos/cmichel67/42904978424
It was two weeks after the Covid lockdown hit San Francisco. Many entrepreneurs were starting to worry. The venture capitalists of Sandhill Road and South Park were still taking pitch meetings, albeit over Zoom. But the check writing had practically stopped, and “The Great Pause of 2020” had begun. At the early-stage venture firm NFX, James Currier huddled around a Zoom with his co-founders, Gigi Levy-Weiss and Pete Flint. Being a four-time entrepreneur himself, Currier knew that this was the moment NFX was built for. It’s said that generals are made in times of war. The world was at war with a virus, and he was hatching a plan.“When everybody is running for the exits, that’s when the innovators need us the most,” he told me.And so it happened that when NFX launched its one-of-a-kind FAST Seed program on April 14, they were actually funding startups at three times their pre-Covid rate. “We saw some of the best investment opportunities during this time of crisis”, said Currier. Since then, NFX has launched a second program called The Bio Draft, designed to speed up the funding and launch of biotech startups (my company, SynBioBeta, is also one of the organizers of The Bio Draft). NFX is just one of a number of Silicon Valley VCs who are getting into the world of reading, writing, and editing DNA.
Biotech is a traditionally slow-moving, capital-intensive business, and Covid isn’t helping. Crunchbase reports that deals are down significantly from this time last year, with seed funding faring the worst at 57% of last year’s deal flow.While segments like pharma are still doing biotech the old way, the world of chemicals and materials is moving toward a more agile engineering approach called synthetic biology, which combines big data, AI, and biomanufacturing to make things faster, cheaper, and better. This is enabling small innovators to engineer an insulin replacement drug that adjusts its own dosage by sensing your blood sugar, or a soil probiotic for corn that reduces the need for fertilizer and reverses climate change. That’s synthetic biology.Just as Amazon Web Services (AWS) has revolutionized the way companies store and compute their data, synthetic biology is the platform that will change how we make things with biology.These more agile technologies are demanding more agile funding approaches, and the last 15 years have seen some helpful new options for getting biotech startups up and running. Y Combinator (YC) was founded in 2005 and has funded over 2000 startups. Since 2014, they’ve expanded into all areas of biotech and the life sciences. YC’s three-month accelerator program provides a little seed funding, helps startups develop their ideas, and introduces innovators to investors. Synthetic biology’s first unicorn, Ginkgo Bioworks, was also the first biotech company to go through YC. Sam Altman, the president of Y Combinator until last year, just announced a personal project to fund startup “moonshots” to the tune of $3 million each.“We are particularly interested in companies addressing climate change and pandemics, but the list of urgent problems in the world is long,” said Altman on Twitter. “Science and technology drive the world forward, and companies are often the most effective vehicle.”Indie Bio is another accelerator program similar to Y Combinator, but with an exclusive focus on biotech. Since its start in 2014, it has created $2.4 billion in enterprise value across 116 startups.Accelerators like these are extremely important, but they can’t fully replace venture capital (VC) when it comes to growing companies to commercial scale. Where NFX shines is in pioneering innovative technology that helps fund startups in new and clever ways. These tools provide access to venture capital to people who have traditionally fallen outside the core network.NFX innovations include: 1) The Bio Draft, a unique take on fundraising for bio startups where investors compete to invest in companies, the same way NBA teams compete to draft new players (apply here by July 17th); 2) The Company Brief, a freely available, structured way for founders to present their ideas to investors; and 3) Signal, billed as “the fundraising CRM for startup founders.”“We’re hopeful that over the next decade, these tools are going to make a serious impact in how investment takes place, and who has access to the right types of capital and the best advice,” Currier told me. “We hope to have thousands use these tools over the years.”
"The Bio Draft is a great way to connect founders with investors like me," said Zal Bilimoria, who used to be a partner at A16Z and has since left to start Refactor Capital, a seed-stage VC firm that backs founders solving fundamental human problems in areas like health, bio, and agriculture. "We invested in a fascinating company operating at the intersection of bio and ag during last year's Draft.”Last year, 52 companies applied to The Bio Draft, 27 were accepted, and a hundred meetings were held with the 21 VCs who participated. In the end, four companies were funded, and two subsequently participated in Y Combinator’s winter 2020 cohort.This year, VCs have committed $10 million in funding to The Bio Draft. Participating firms include a who’s who of biotech venture capital, including M.Ventures, DCVC (where I’m an operating partner), Fifty Years, Illumina Ventures, Codon Capital, Civilization Ventures, Innovation Endeavors, tech.bio, and many more. Currier expects the number of applicants to double, with many companies ultimately finding an investor match.
Currier is a prolific thinker and writer. He has pioneered user-generated models, viral marketing, A/B testing, crowdsourcing, and other growth techniques that have since been adopted by nearly all technology companies, including LinkedIn and Facebook. But he is perhaps best known as Silicon Valley’s leading expert on network effects. In business, a network effect is when each new user in a system makes that system more valuable to everyone. (Think of Facebook: as it grew in popularity, it also became increasingly useful as a means to communicate with virtually everyone.) Currier believes that network effects account for the majority of value created in the technology industry over the past few decades. He has identified 14 different kinds of network effects, and will be writing about a fifteenth later this year.But tech companies like Facebook aren’t the only ones to benefit from network effects. Other industries will begin to see network effects as they become more digitized, and biotech is first in line for this transformation. For example, in synthetic biology—an industry that brings together highly digital disciplines of molecular biology, computation, and automation—the number of network effects will rapidly increase over time, Currier told me.“The first one we’re seeing is what we call a two-sided platform network effect, and Mammoth Biosciences [a company funded by NFX] is implementing that approach to building their business,” he says.Mammoth is building a technology platform based on CRISPR gene editing. Currently, Mammoth is using this technology to make low-cost, scalable Covid-19 tests. In addition, Currier says, many companies can partner with Mammoth to use its platform to build their own new products, from diagnostics and therapeutics to applications in agriculture, environmental monitoring, biodefense, and more.“The more partners that build businesses on top of the Mammoth platform, and the more data and software that Mammoth builds, the faster all those partners can build new products and get them to market,” Currier says.
Trevor Martin, co-founder and CEO of Mammoth Biosciences. SYNBIOBETA"James understands that biotech is becoming more and more like tech,” Trevor Martin, co-founder and CEO of Mammoth Biosciences, told me. “He has helped us think bigger about our company and the huge impact it stands to have on the world."Mammoth could benefit from another network effect that Currier has described: the real-time data network effect. By uploading their Covid test results, smartphone users could send data to Mammoth, who could then, for example, generate a heatmap of anonymized data showing which geographies have a high prevalence of certain Covid strains. With that, users could better protect themselves from an outbreak.In a blog post on network effects in biotechnology, Currier likens this phenomenon to how the navigation app Waze gathers data from many drivers and helps them avoid bad traffic in real-time. “This is potentially a classic network effect,” he says.
Currier has also written about one of the biggest tropes in entrepreneurship: success is 1% inspiration and 99% perspiration. He thinks that may not be exactly right.“What I’ve seen is that when founders work hard to get the right idea, that idea can be magic at the right time,” he says. “The combination of the right idea at the right time does a lot of the heavy lifting for you.”He goes on: “Some venture firms prefer to invest in people, and others prefer to invest in the market. But sometimes you have to back off your original idea and shift to a better idea for the market. That ends up making more of a difference than another 80 hours of perspiration.”Currier says that entrepreneurs have to ask themselves honestly: Do I have real product-market fit? Is this the right idea at the right time?“When the market wants your idea, it’s like someone putting two fingers in your nose and pulling your head forward. You definitely feel it. It doesn’t happen very often, but when it does, you know it.”Follow me on Twitter at @johncumbers and @synbiobeta. Subscribe to my weekly newsletters in synthetic biology. Thank you to Kevin Costa and Marianna Limas for additional research and reporting in this article. I’m the founder of SynBioBeta, operating partner at DCVC, and some of the companies that I write about—including Ginkgo Bioworks, NFX, DCVC, M. Ventures, tech.bio, and AWS—are sponsors of the SynBioBeta conference and weekly digest. Here’s the full list of SynBioBeta sponsors. Originally published on Forbes: https://www.forbes.com/sites/johncumbers/2020/07/11/as-some-startup-vcs-hunker-down-others-are-finding-new-ways-to-fund-the-next-aws-of-biology/
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